In 2023, more than $10 billion was lost to fraud in the U.S.—a record-breaking number and a 14% increase over the year prior, according to the FTC. While phishing and imposter scams top the charts, these losses highlight a broader systemic issue: even when authentication systems like two-factor authentication (2FA) and biometrics are in place, consumers continue to fall victim.
The implication for financial institutions, payment platforms, credit unions, and insurers is clear: fraud prevention can’t stop at the login screen. Today’s scams are bypassing technical defenses by exploiting the one vulnerability even the most advanced security tools can’t patch—human trust.
If your organization is only securing access, but not empowering customers to detect deception, your fraud defenses may be dangerously incomplete.
The New Face of Fraud: Bypassing Technology, Targeting Trust
Scammers no longer need to “hack” accounts to gain access. Increasingly, they rely on social engineering tactics that trick legitimate users into voluntarily transferring funds, sharing credentials, or providing verification codes.
For example:
- Phishing and spoofing attacks can mimic bank messages with uncanny precision, even spoofing caller ID to appear legitimate.
- Digital arrest scams and high-pressure social manipulation tactics convince targets they’re under investigation—and need to “cooperate” with law enforcement by moving funds.
- Account takeover attempts often begin with stolen credentials but escalate through manipulation of verification steps using fake personas or borrowed identities.
These tactics exploit consumer confusion, urgency, and overconfidence in familiar platforms. Even with 2FA or biometric verification in place, scammers can often walk through the front door—because the customer let them in.
The Institutional Impact: Broken Trust, Higher Costs, Growing Liability
When a scam is successful, it doesn’t just impact the individual—it reverberates across the ecosystem. For banks, card issuers, and digital payment platforms, the consequences include:
- Reputational damage when consumers blame the institution for not preventing the fraud.
- Operational strain on fraud departments and support teams managing dispute volume.
- Financial liability as scam liability policy shifts increasingly put pressure on institutions to absorb scam-related losses.
- Regulatory scrutiny as governments push for stronger consumer protections in the face of rising fraud.
More critically, institutions are caught in a trust paradox: customers are encouraged to verify communications and protect their identities—yet the tools available to them are often too limited or confusing to act on in real-time.
Institutions that don’t evolve beyond legacy defenses may unintentionally become scam enablers, offering just enough security to create false confidence—but not enough to stop the manipulation.
Where Traditional Authentication Falls Short
The problem isn’t that 2FA, biometrics, or device verification are inherently flawed. The problem is that they verify the device or user—not the context.
- 2FA doesn’t recognize when a user is being manipulated to enter a code.
- Biometric logins can’t detect if the person is under duress.
- SMS verification assumes that access equals legitimacy.
Even multi-factor authentication assumes that fraudsters are external actors, rather than skilled manipulators who operate through the consumer themselves. This creates a critical blind spot, especially when scammers are impersonating trusted figures like customer support agents, law enforcement, or even family members.
In these scenarios, the scam isn’t a breach—it’s a performance. And without layered systems that analyze intent, behavior, and communication signals in real time, institutions leave their customers dangerously exposed.
Moving from Defense to Empowerment: A New Layer of Protection
Institutions don’t have to choose between more friction and more fraud. A new generation of integrated scam detection technology makes it possible to provide proactive protection that is both real-time and user-friendly.
This advanced approach empowers consumers to:
- Validate whether texts, emails, or messages are trustworthy—directly within the channels they already use.
- Confirm who they’re talking to with just a phone number or email, without needing to do their own investigation.
- Receive alerts at the exact moment they’re about to act—before money changes hands or sensitive data is shared.
- Access up-to-date scam insights and live help, right when they’re feeling unsure or overwhelmed.
These AI-powered solutions go beyond traditional fraud tools by providing a real-time layer of consumer protection that works alongside existing systems. Whether offered as a companion service or integrated through partnerships, they enable institutions to move from passive gatekeeping to active guidance—helping customers recognize scams and avoid deception before financial loss occurs.
This not only reduces fraud—it rebuilds trust, giving consumers confidence that their bank or provider is a true partner in their safety.
The Future of Fraud Prevention is Shared
The threat landscape isn’t just evolving—it’s outpacing traditional defenses. But the solution doesn’t require reinventing the wheel. It requires expanding the perimeter of protection to include the moments where scams actually happen: in conversation, in emotion, and in manipulation.
By offering tools that help consumers recognize scams in real time—and integrating those tools into everyday digital experiences—financial institutions can change the role they play in the fraud equation.
From responders to protectors.
From enablers to stewards of safety.
From gatekeepers to guides.
Empower customers to detect deception—learn more about KnowScam.
